Journal Issue

IMF Executive Board Concludes 2017 Article IV Consultation with the Republic of San Marino

International Monetary Fund. European Dept.
Published Date:
April 2017
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On April 3, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with the Republic of San Marino.

San Marino’s economy is slowly recovering after a deep recession following a series of financial sector shocks. Growth returned in 2015 and accelerated in 2016 to an estimated 1 percent, on the back of stronger domestic and external demand. Importantly, employment has been rising and the unemployment rate declined to 8.5 percent in December 2016.

Moderate growth is expected in the near and medium term. GDP growth is projected to reach 1.3 percent in the medium term, driven by continued expansion in non-financial industries and services. However, on current trends, the pace of growth would not be strong enough to bring output to precrisis levels over the next five years, while risks remain tilted to the downside.

Notwithstanding important recent initiatives to improve the business environment, challenges remain to diversify the economy beyond banking and support stronger growth. The banking system continues to face high nonperforming loans (NPLs), low provisions, and low profitability. While public debt and deficit have been relatively low, public finances have little space to respond to future shocks and mobilize resources for pro-growth policies, given limited buffers and no access to external financing.

Executive Board Assessment2

Executive Directors welcomed the ongoing recovery in economic activity, but noted that the outlook remains challenging. To achieve more robust and sustained medium-term growth, Directors encouraged the authorities to press ahead with reforms to restore the health of the banking system, rebuild fiscal buffers, and diversify the economy beyond the financial sector.

Directors stressed the importance of rehabilitating the banking system and dealing with the very high stock of nonperforming loans. They welcomed the central bank’s initiative to carry out an Asset Quality Review (AQR), noting that it is an important step in the process of putting the banking system on a solid footing. In this regard, Directors endorsed a multifaceted approach, entailing repairing banks’ balance sheets based on the AQR results, and removing remaining obstacles to NPL resolution, including regulatory, tax, and legal reforms to significantly reduce NPLs over the medium term. They emphasized that a credible strategy for Cassa di Risparmio della Repubblica di San Marino (CRSM) should be guided by AQR findings, and any restructuring plans should ensure long-term viability. At the same time, Directors supported the need to strengthen bank oversight to mitigate future risks, including revamping supervision and developing a robust macroprudential framework.

Directors agreed that a gradual fiscal adjustment to rebuild buffers should start this year, targeting a modest surplus by 2019 to create space to respond to future shocks. They emphasized that tax policy measures, particularly the introduction of a VAT system, could play a key role in light of San Marino’s low revenue and high need for pro-growth spending. On the expenditure side, containing the public wage bill and reforming the pension system would also be important. Directors shared the view that access to external financing would help enhance the ability to respond to shocks, diversify funding sources, and break the bank-sovereign loop.

Directors supported continuing efforts to diversify the economy, improve the business environment, and increase labor market flexibility, which will help attract more investment and enhance growth potential. Long-term investments in education and vocational training were also encouraged. Directors welcomed the recently completed AML/CFT national risk assessment and encouraged the authorities to implement the AML/CFT Action Plan. While recognizing resource constraints, they encouraged the authorities to strengthen data provision to enhance transparency and facilitate more informed decision-making by households, businesses, and policy makers.

San Marino: Selected Economic Indicators, 2013–2017
GDP per capita (2015): 46,185 U.S. dollars

Population (2016): 34,267 persons
Life expectancy at birth (2011): 83.3 years

Literacy, adult (2008): 96 percent
Activity and Prices
Real GDP (percent change)−3.0−
Unemployment rate (average; percent)
Inflation rate (average; percent)
Public Finances (percent of GDP) 1/
Overall balance−0.90.8−0.2−0.6−1.0
Government debt20.819.019.721.621.8
Money and Credit
Deposits (percent change)−2.04.0
Private sector credit (percent change)−9.61.0
Net foreign assets (percent of GDP) 2/4.45.4−3.8
External Accounts (percent of GDP)
Balance of goods and services32.731.631.3
Gross international reserves (millions of U.S. dollars) 2/539.3392.0367.2
Exchange Rate (average)
Euros per U.S. dollar0.750.750.900.900.95
Real exchange rate vis-à-vis Italy100.0100.9101.0101.6101.4
Financial Soundness Indicators (percent) 3/
Regulatory capital to risk-weighted assets13.611.412.713.6
Bad loans to total loans13.916.118.518.7
Loan loss provision to total loans26.730.328.626.6
Return on equity (ROE)−7.8−21.4−9.0−10.5
Liquid assets to total assets29.632.429.829.5
Liquid assets to short-term liabilities60.665.458.959.1
Sources: International Financial Statistics; IMF Financial Soundness Indicators; Sammarinese authorities; World Bank; and IMF staff calculations.

For the central government. Does not include possible costs of future bank recapitalization.

For 2015, latest available.

For 2016, latest available.

Sources: International Financial Statistics; IMF Financial Soundness Indicators; Sammarinese authorities; World Bank; and IMF staff calculations.

For the central government. Does not include possible costs of future bank recapitalization.

For 2015, latest available.

For 2016, latest available.


Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.


At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here:

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